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Bankruptcy and Insolvency Archives

Insolvency -- Set-offs vault over court stays

When an insolvent company seeks creditor protection through the courts, all claims against the company are stayed and cannot be pursued. If the company restructures, unsecured creditors will normally see their claims against the debtor sharply reduced and repayment periods extended. If the company is assigned into bankruptcy, unsecured creditors will often receive pennies on the dollar or see their claims go entirely unpaid.

Insolvent Individuals

An individual may become insolvent for a variety of reasons. For many people, it may be a matter of over use of credit cards or other credit facilities. For the individual who owns or operates a business, if the business becomes insolvent, the individual may also find himself or herself to also be insolvent. Regardless of the reasons for insolvency, there are options available for individuals under the Bankruptcy and Insolvency Act (the “BIA”).

Equitable Subordination - Will it find a home in Canada?

When a debtor is insolvent, recovery by a creditor will generally depend on the creditor's ranking. Secured creditors will have priority over preferred creditors who in turn have priority over unsecured creditors. If a claim can be characterized as an equity claim, it could be further subordinated. Notwithstanding these general rules, the Supreme Court of Canada could soon give courts wider discretion to adjust priorities even further in certain situations.

Redwater Case Update: Court of Appeal upholds l seek leave to appeal to Supreme Court of Canada

When an oil well operator becomes insolvent, a significant liability will often exist for "orphan wells," wells with environmental remediation costs which exceed any remaining value. Under provincial legislation, such remedial costs must be paid before even secured creditors recover any money. But does this legislation, having the goal of environmental protection, conflict with the priority regime under the federal Bankruptcy and Insolvency Act("BIA")?

Pursuing claims in bankruptcy

In a bankruptcy, the bankruptcy trustee is in charge of collecting on any claims held by the bankrupt, and is also given additional powers under the Bankruptcy and Insolvency Act (BIA) to attack transactions entered into prior to bankruptcy. But what happens when the trustee fails or refuses to pursue a claim?

Director liability during bankruptcy

When a company faces insolvency or bankruptcy, the directors (and sometimes officers) of the company can face personal liability for the company's debts. Although a properly incorporated company is a separate legal person and as a general rule its creditors have no personal claim against the company's directors, there are many exceptions to this rule.

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